Question:
Which of the following statements is NOT CORRECT in the context of an Open Economy IS-LM Model under Floating Exchange Rate (with fixed price) and Perfect Capital Mobility?
Which of the following statements is NOT CORRECT in the context of an Open Economy IS-LM Model under Floating Exchange Rate (with fixed price) and Perfect Capital Mobility?
Updated On: Oct 1, 2024
- An expansionary fiscal policy would appreciate the domestic currency value
- An expansionary monetary policy would depreciate the domestic currency value
- Exchange rate has significant impact on determining the equilibrium level of income and employment
- Monetary policy is fully effective in determining income and employment whereas fiscal policy is ineffective
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The Correct Option is C
Solution and Explanation
The correct option is (C): Exchange rate has significant impact on determining the equilibrium level of income and employment
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